11-12 June, 2018
Share your thoughts #CAPASummit
North Asia’s expanding LCC markets
Peter HarbisonExecutive ChairmanSeoul, 11-Jun-2018
Share your thoughts #CAPASummit
1. The effects of fuel prices on the market2. Global markets; N Asia still lags SE Asia3. A highly competitive LCC marketplace4. Local fleet profiles
Where to, North Asian LCCs?
Share your thoughts #CAPASummit
The growing impact of oil
Source: oil-price.net
Jet fuel prices have risen almost 50% since their 2017 lows
Share your thoughts #CAPASummit
130
125
120
115
110
105
100
95
90
85
80
Passenger yield / Load Factor / Passenger growth
2011 2012 2013 2014 2015 2016 2017
140
120
100
80
60
40
20
Barre
l pric
e ($
)
10%
8%
6%
4%
Airline operating profit (EBIT)January 2011 = Index 100
$
$
Passenger growth
Profit
Load factor
Average ticket price
Oil barrel price
Source: IATA Air Transport.
Oil price/pax/fares index
2017 was a fairytale yearIt was not a normal year
Share your thoughts #CAPASummit
$20 $30 $40 $50 $60 $70 $80 $90 $100
6.2%
9.9%
12.3%
13.7%
14.6%
14.5%
25.3%
33.7%
40.4%
45.9%
31.3%
26.7%
21.4%
15.4%
8.3%
31.4%
23.0%
Low CostCarrier
Full ServiceCarrier
Fuel impact on operating costs
Source: CAPA – Centre for Aviation;CAPA Cost Database; OAG.
Increasing fuel costs impact LCCs more –reducing the cost advantage
Share your thoughts #CAPASummit Source: CAPA – Centre for Aviation. CAPA Cost Database.
Airline CASK: Asia PacificUS
cent
s per
ASK
20
18
16
14
12
10
8
6
4
2750 1000 1250 1500 1750 2000 2250 2500 2750 3000 3250 3500 3750 4000 4250 4500 4750
Average Trip Length (km)
Full Service Carrier Low Cost Carrier
Qantas7.25 US cents
AirAsia Berhad3.06 US cents
Share your thoughts #CAPASummit
201819881988 1998 2008 2018
114 545 2,775 5,638 Source: CAPA Fleet Database
LCC fleet growth 1988-2018
Share your thoughts #CAPASummit
LCCs by regionMain Groups
• AirAsia Group• AirAsia X Group• Cebu Pacific Group• Grupo Viva• Indigo Partners• Jetstar Group• Norwegian• Southwest• Tiger Airways Holdings• VietJet Group• Volaris• Wizz Air• Lion Group
o (Batik & Malindo are FSCs)
Europe DOM: 41.2%
INT: 9.0%
JapanDOM: 51.9%INT: 23.2%
AustraliaDOM: 26.4%INT: 14.5%
GlobalDOM: 32.4%INT: 12.5%
South KoreaDOM: 50.4%INT: 34.2%
Source: CAPA – Centre for Aviation & OAG. Period: Jan-Jun 2018
ChinaDOM: 9.6%INT: 14.0%
Asia PacificDOM: 28.5%
INT: 8.1%India
DOM: 68.7%INT: 21.6%
IndonesiaDOM: 52.6%INT: 39.8%Philippines
DOM: 60.4%INT: 30.1%
Share your thoughts #CAPASummit
30% of all aircraft inservice are with LCCs
LCC global market shares: in service
Source: CAPA Fleet Database
Share your thoughts #CAPASummit
Source: CAPA Fleet Database
LCC global market shares: orders
50% of the world’s LCC aircraft orders are in Asia Pacific
Share your thoughts #CAPASummit
Global LCC Fleet5,638 in service4,785 on order
Source: CAPA Fleet Database
Fleet-to-order ratio
Asia Pacific LCC Fleet1,692 in service2,249 on order
On Order
In Service
47%2,249
30%1,692
LCC Globally APAC
Share your thoughts #CAPASummit
Source: CAPA Fleet Database.
Asia Pacific LCC Orders1,692 in service
2,249 on order
1,548
57675
2525
21 airlines
91% of orders are for narrowbodies
Share your thoughts #CAPASummit
60% of the world’s 112 LCCs are in Asia Pacific/Middle East • Highly competitive; LCC vs LCC• High growth• With two or three exceptions they are all small• Consolidation?• Market exit?
But North Asia still lags……..
North Asian LCCs remain at an early stage of evolution
Share your thoughts #CAPASummit
The growth of Korea’s LCC fleet
917
26 3140
5062
81
103
121
0
40
80
120
160
0
10
20
30
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Net Additions Total
Source: CAPA Fleet Database
Share your thoughts #CAPASummit
Korea vs Japan LCC fleet ages12.1
5.1
13.111.9 11.8
10.1
2.7
5.24.4
3 2.8
0
5
10
15
AirBusan
AirSeoul
EastarJet
Jeju Air Jin Air t'way AirAsiaJapan
JetstarJapan
Peach SpringJapan
Vanilla
Korea Japan
Korea fleets mostly second hand and older
Share your thoughts #CAPASummit
• LCCs account for much of the recent growth – with limited impact on FSCs
• New smaller widebody twins and long haul narrowbodiescreate economic feasibility where previously not possible
• Together they are creating new city pair opportunities, bringing local economic growth
New entrants, new aircraftare changing network growth
Share your thoughts #CAPASummitSource: IATA.
The number of unique city pairs
has doubled in 20 years, exceeding
20,000 for the first time in 2017
City pair growth
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Num
ber o
f uni
que
city-
pairs
US$/
RTK
in 2
014U
S$
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
Real cost of air transport
Unique city pairs
Share your thoughts #CAPASummit
LCC fleet growth in
Asia Pacific2008-2018
Source: CAPA Fleet Database. As at 28 Feb 2018.
Share your thoughts #CAPASummit
Thankyou very much!Enjoy the Summit